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Number of Self Managed Super members looking to invest in Australian shares has more than doubled

 

23 April 2013

New research released today reveals that the number of Self Managed Superannuation Fund (SMSF) members planning to invest in direct Australian shares or equities when they reduce their asset allocation to cash investments, has increased from 30% last year to 70%.

The Westpac Self Managed Superannuation Report1 also found that 19% of SMSF members looking to reallocate their cash holdings to other asset classes would invest the funds directly in International shares.2

The vast majority of SMSF members currently hold cash in their fund (89%). Respondents show a high average asset allocation to direct shares (44%) and cash (27%), with smaller amounts invested in international equities, bonds and property.

Sinclair Taylor, Head of SMSF Trustee Distribution, Westpac, explains, “As the RBA cash rate has continued to decrease over the past year, cash has become a less attractive investment option for some SMSF members, despite its safety. This could explain why we are seeing 14.5% of respondents intending to move out of cash in the next 12 months, representing an average shift of $12.7 billion in asset allocation,3 with Australian shares likely to be the main recipient.”

“However, some SMSF members are still waiting for the right signals before moving into higher risk assets in the short-term. The GFC, the European debt crisis, concerns over Chinese and Australian economic growth and other geopolitical events cannot be understated in their impact on investor sentiment; meaning cash still remains a safe option. This is indicated by more than two out of five (44%) respondents waiting for a more stable market before they reduce cash investments,” said Mr Taylor.

Regardless of investment choices, SMSFs are proving popular, with an 8% improvement in SMSF consideration since last year (54% to 62%) amongst those that do not currently hold an SMSF. Current SMSF members are also becoming more inclined to believe that they can select better investment options themselves, with confidence increasing from 23% to 62% in the last 12 months.

More than one third of respondents suggested that access to insurance coverage through their APRA fund (36.5%) was the main driver for holding multiple super funds, suggesting that many Australians are aware of the potential benefits for holding insurance inside superannuation.

Despite this trend however, the report highlighted that for those Australians who have an SMSF and are still members of an APRA fund, their SMSF is their preferred investment option, with more than eight in ten members saying so, an increase from 69% to 86% since last year.

“It's positive to see there is a high consideration for SMSFs, with more than six in ten of those without an SMSF thinking about setting one up. An SMSF is not right for everyone however, so it's important to seek the advice of a financial planner if you are not sure whether an SMSF is right for you,” said Mr Taylor.

“While an SMSF does provide a high level of control and investment flexibility, many members look for support and advice from experts, rather than managing their SMSF assets entirely alone. At Westpac, we are offering all SMSF customers who open a DIY Super Solution bank account the option of having their own Relationship Manager, an SMSF specialist, who will support them in getting the most out of their SMSF – by providing access to a range of SMSF products, services and educational resources, and can also manage their everyday banking needs.”

The number of Australians with an SMSF stating they have made positive investment returns on their SMSF in the past 12 months has also increased with 74% of respondents claiming this, compared to 59% last year.

2013 FINDINGS

Sample Profile

  • 74% of survey respondents are members of an SMSF.

SMSF Demand

  • 62% of those who are not a member of an SMSF would consider establishing one in the future.

SMSF Benefits

  • The most commonly cited financial benefits of managing an SMSF for trustees includes the ability to select better investment options (62%) and achieve positive investment performance (60%)
  • Over a third of respondents point to access to insurance coverage through their APRA fund (36.5%) as the reason for holding an SMSF and other super funds.

SMSF Returns

  • Almost three in four respondents (74%) claim to have made a positive return on their SMSF portfolio over the last 12 months.

SMSF Asset Allocation & Intention

  • The vast majority of trustees hold cash investments in their portfolio (89%)
  • Trustee respondents show a high average allocation to direct shares (44%) and cash (27%), with small amounts invested in international equities, bonds and property
  • Response around what signals trustees are waiting for to exit cash and enter other asset classes include;
    • 44% of respondents who hold cash investments are waiting for a more stable market before they exit cash
  • 70% would look to direct Australian shares when cash is divested while 19% will invest in direct global equities.

2012 FINDINGS

Sample Profile

  • (91%) of survey respondents were members of an SMSF
  • 66% of SMSF respondents are also members of an APRA fund and 69% of these use their SMSF as the main super fund.

SMSF Drivers & Barriers

  • 54% of those who are not a member of an SMSF would consider establishing one in the future.

SMSF Benefits

  • 33% cite tax benefits as a major financial benefit
  • 28% highlight regulation of SMSF service fees and cost.

SMSF Returns

  • 59% claim to have made a positive return on their SMSF portfolio over the last 12 months.

SMSF Asset Allocation & Intention

  • Trustee respondents show a high average allocation to direct shares (45%) and cash (25%), with small amounts invested in international equities, bonds and property
  • Signals to exit cash and enter other asset classes include;
    • 25% of SMSF respondents are doing so as opportunities permit
    • 17% are looking for better numbers from Europe
    • 15% are waiting for clearer US and world economic data
  • 30% would look to direct Australian shares when cash is divested while 17% will invest in direct global equities
  • 54% will invest directly while 30% will invest via their platform.

1 An annual survey now in its second year, which saw 955 Australians including 705 SMSF trustees interviewed (74% of respondents).

2 This finding was also evident in the March 2013 Westpac Red Book, which found that the Westpac Consumer Aversion Risk Index saw a shift away from real estate (+1.4 points to 21.7%) in favour of shares (+1.4 pts to 8.1%) with regards to questions around wisest place for savings.

3 Please refer to The Westpac Self-Managed Superannuation Report, February 2013, slide 19 for full calculation.